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Stocks 303: Understanding the Statement of Cash Flow

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1.
Creditors use statements of cash flow to keep track of their borrowers abilities to repay loans.
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True. These statements keep them informed about where their borrowers money is going.
2.
The statement of cash flow is divided into three sections. Which of the following is not one of those sections?
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Cash flows from common stock issued. Common stocks do not have their own section.
3.
Equipment expenditures are included in which section of the statement of cash flow?
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Investing activities. Equipment is considered an investment.
4.
Why is depreciation added to net income when calculating a firms cash flow from operating activities?
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Cash is not paid out for it. Because the statement of cash flow records inflows and outflows of cash, depreciation must be added to net income, since it cannot be subtracted from it.
5.
The investing activities section of the statement of cash flow records the buying of machinery.
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True. Buying equipment is considered an investment activity by a corporation.
6.
The statement of cash flow records inflows and outflows of cash as soon as income is earned or expenses incurred.
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False. It records income and expenses regardless of when they were earned or incurred.